RECOMMENDATION - BUY AT CMP
TARGET- 2900, TIME HORIZON-3 MONTHS, STOP-1845
RATIONALE :
The stock had been consolidating in a range of 1600 to 2100 for almost 1 year. This range was conclusively broken recently with a remarkable increase in turnover.
During this consolidation, the stock consistently maintained above the 200 dma signaling the innate long term strength.
The consolidation which constituted wave 2 just retraced about 25% of the rally from March09 lows. Such resilience after sharp rallies auger well for the medium to long term trend.
The risk/reward ratio is fairly favorable buying at the current market price. The downside seems to be restricted to 5-8% whereas immediate upside can be in excess of 30%.
The table above shows the investments of the company in various equity/preference shares. The value of these investments are approximately 10% more than the market value of the company - However, this is a very conservative estimate as all unquoted shares have been taken at cost which is unrealistic to say the very least. The actual discount on the stock may easily be to the tune of 20-25%.
Buying a company where the value of embedded assets is much more than the market cap provides a lot of margin of safety.
Due to the reasons mentioned above, we feel that the stock is poised for decent upsides in the short to medium term.
Disclaimer : The recommendations mentioned herein are for educational purpose only. One should not take buy/sell decisions based on the above analysis which is prone to errors. The author does not undertake any liability whatsoever arising out of profits/losses accruing from using the above analysis.
No comments:
Post a Comment